German business confidence collapsed the most in three decades after restrictions to slow the spread of the coronavirus forced mass closures of companies and stores across Europe’s largest economy. The slump is even more pronounced than last week’s preliminary reading suggested and lends credence to predictions that the 19-nation euro area is sliding into its worst recession in history.
“Companies’ expectations in particular have darkened as
never before,” said Ifo President Clemens Fuest. “The German economy is in shock.”
Governments from across Europe are trying to soften the blow with unprecedented fiscal spending. In Germany, Chancellor Angela Merkel has lined up a 550 billion-euro ($596 billion) public-guarantee program to keep companies afloat and signed off on an emergency budget that includes another 750 billion euros of measures. Ifo, whose business climate index fell to 86.1 in March, has predicted total output could fall anywhere between 1.5% and 6% this year — depending on how long the current disruptions last.
The expectations component of its survey, which covers 9,000 companies from industries including manufacturing to construction, suggests the worst might still be ahead. It fell to 79.7, the lowest since 2008.